Data-driven services have transformed the retail banking experience, and are now firmly on the agenda for corporate treasurers. A recent survey by Icon Solutions found that 79% of banks recognise expectations from corporate clients are increasing. Real-time cash balances (84%), enhanced security and fraud prevention (74%) and real-time balance dashboard (70%) are offerings that corporates are most willing to pay for now, but will increasingly be expected as standard. This is already the case with services such as virtual accounts and the expanded automation of payables and receivables.
A major catalyst for the delivery of these new data-led services is the ISO 20022 messaging standard. Rightly described as a “game-changer”, it supports standardised, relevant and enriched datasets that are directly associated with the payment message to significantly reduce complexity and costs.
In parallel, a host of new industry initiatives are dovetailing with ISO 20022 that have the potential to transform the corporate treasury function by standardising data access, modernising the underlying payment infrastructures and enabling the delivery of new overlay services.
We have seen ambitious projects globally to advance and future-proof underlying payments infrastructures to support data-rich transactions. These are now taking shape in Europe and the UK.
For example, the European Payments Initiative (EPI), launched by the European Commission, aims to address the clunky patchwork of domestic payments systems that inhibit instant and interoperable payments across Europe. And in the UK, the New Payments Architecture (NPA) plans to deliver a more robust and resilient single clearing and settlement core utilising ISO 20022.
Although both of these initiatives have highlighted the impact on the retail payments landscape, they will also enable a host of use cases to benefit all end users, including corporates. This is particularly true when we look at overlay services.
Payment overlay services
Overlay services refer to additional services delivered on top of a core platform to provide added value. One example is Confirmation of Payee (CoP), which can reduce fraud and misdirection of payments through name checks.
However, it is Request to Pay (RtP) services that potentially hold the most promise for corporates. RtP introduces a secure messaging channel between the payee and payer in order to offer a new flexible way for payments to be settled between people, organisations, and businesses. It enables the payee/biller to initiate the payment process, monitor the status and communicate with the payer. It also allows for additional information, such as the invoice, to travel with the payment.
Corporate treasurers could realise significant benefits from RtP, including improved operational efficiency, reduced costs and greater transparency, through services such as e-invoicing, payments reconciliation, and the further digitisation of processes and integration into workflows. Given that almost 100% of corporates expressed interest in RtP in a recent poll from the Euro Banking Association, this is expected to feature prominently on the strategic roadmaps for banks as demand grows.
Industry initiatives are driving a sustained cycle of innovation across banking and payments. This marks a hugely exciting new chapter for treasurers, but the potential scale of the change calls for a reformulation of the corporate-bank relationship away from just the consumption of products.
Rather, banking partners who act as trusted advisers can help corporates in navigating the technological changes needed. More broadly, they can also help corporates understand and recognise how the market forces, regulatory initiatives, and technological innovations that have had such a profoundly positive impact on retail banking are now interacting to transform the treasury function.